Abstract

In the countries of Central and Eastern Europe, as in other countries with a past of state socialism and central planning, the political revolutions of the late 1980s brought about dramatic and rapid changes in the economy. In allocating their resources, firms and households had to face the emergence of markets and challenges from foreign competitors. In financial institutions, the mono-banking system was broken up and replaced by Western-type central and commercial banks. Capital markets came into being. New fiscal structures, on the revenue as well as expenditure side, were introduced. Individual property rights were established, and mass-privatization efforts commenced. Simultaneously, macroeconomic stabilization was needed and external shocks — for example, the demise of the CMEA — had to be absorbed.